The Securities and Exchange Commission of Pakistan (SECP) has proposed to enhance the scope of the Real Estate Investment Trusts (REITs) assets in Pakistan covering agriculture, healthcare, transport, power/energy, and telecommunication.
According to the SECP’s concept paper “Review of Landscape & Revamping Framework-REITs”, under the existing regime; at least seven different approvals are required, making REITs less competitive. The universe of the REIT Assets and infrastructure is limited and the regulatory overburden in terms of segmented reporting and approvals leads to no value addition.
The purpose of proposed regulatory amendments is to introduce new REIT products, create ease for REIT Management Companies (RMCs) in launching different REIT schemes and shift towards a reporting-based regime.
The universe of REIT assets is proposed to be enhanced by allowing the following additional segments under the REIT Scheme: i) Agriculture ii) Healthcare iii) Transport iv) Power v) Energy vi) Telecommunication vii) Water and sanitation viii) Social, cultural, and commercial segment, and ix) Any other segment/real estate asset as allowed by the Commission. Through proposed amendments, a wide range of projects can be launched under the REIT Scheme.
In addition to nonpublic private partnership REIT Schemes (Hybrid REIT Scheme), a new category of REIT scheme titled ‘Investment based REIT Scheme’ has been proposed. Under the proposed scheme, the RMC would only act as an investment firm instead of a developer.
The RMC shall be responsible for investing in multiple real estate units excluding land with the objective of maximizing return for unit holders. A pool of funds can be invested in units of different real estate projects generating rental income such as residential units, commercial properties, healthcare facilities, amusement parks, shops, etc. Rental income from real estate can be distributed among unit holders.
The SECP has introduced certain regulatory reforms relating to REIT(s) function over the last couple of years. Subject reforms have led to an increase in the number of RMCs and registered REIT schemes. However, the REIT area is new to Pakistan’s market and there is a huge potential for growth, SECP added.
